Reform 'retentions' to help building firms hit top gear ahead of Brexit, MP says

Construction firms are being held back by the "restrictive and grossly unfair" practice of retentions at a time when the industry needs to be operating in top gear ahead of Brexit, a Tory MP has said.

Peter Aldous also said it was a critical time for the industry given the need to build a record number of homes.

But the backbencher said the practice of firms failing to pay back retentions to smaller suppliers was stifling the sector.

Waveney MP Mr Aldous told the Commons that retentions of as much as 10% of a contract value were often withheld, in case the firm did not return to fix any defects.

However, Mr Aldous said the payments were often withheld to improve a firm's financial position, and can take months or even years to be returned.

Ring fencing cash retentions will go a long way to solving the large losses SMEs absorb from upstream insolvencies in the construction industry. Today my ten minute rule bill aims to help those SMEs affected and get the construction industry building.

MPs heard that almost £8 billion of retentions have remained unpaid over the last three years, according to Government estimates.

Over the past three years some firms have lost an average of £79,900 due to other companies going bust, Mr Aldous said.

"If one of the large construction companies were to fail, the consequences for SMEs and their supply chains would potentially be disastrous," he added.

"They could lose all their retentions, adding to the £220 million already being lost annually. This Bill would help avert such a calamity.

"This is a critical time for the construction industry. We need to be building record numbers of homes.

"As Brexit approaches, the construction industry must be able to operate in top gear.

"This restrictive and grossly unfair practice acts as a brake on activity in the sector. Remove it, and we can unleash investment in jobs, apprenticeships and technical innovation."

Tory MP Peter Aldous (Conservative Party/PA)

His Construction (Retention Deposit Schemes) Bill, brought in via a 10-minute rule motion, would create legislation to ensure the money can be returned, establishing a similar scheme to that now in place for private renters, where deposits must be held in a Government-approved scheme.

Mr Aldous went on: "Abuse of retention has a negative, knock-on, domino effect that cascades through the construction industry.

"It restricts investment in new equipment and facilities.

"It prevents firms from taking on more work, and it discourages them from employing more people and investing in apprenticeships."

The Bill was listed for a second reading on April 27, but it has many hurdles to clear as it bids to become law.